SHOP - Here's Why You May Want to Avoid Shopify Stock Even After Selling Off
2024-05-10 08:03:00 ET
Shares of e-commerce and payment platform provider Shopify (NYSE: SHOP) plunged following the company's first-quarter earnings release this week. Is the sell-off a buying opportunity or a sign of potentially more trouble ahead?
Shopify's financial results show a fast-growing company. But that doesn't mean the stock is a buy. The company's market capitalization, currently standing at around $80 billion, necessitates both strong top-line growth and a clear path to substantial profits. It's delivering on the former but not on the latter. Consistent and robust profitability remains elusive -- a big red flag for a company with such a significant market cap and probably a reason to avoid the stock.
The e-commerce company 's first-quarter top-line performance was solid. Total first-quarter revenue rose 23% year over year. Even more, when adjusting for the sale of its logistics business, revenue actually rose 29% year over year -- an acceleration from 24% growth in the fourth quarter of 2023.
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Here's Why You May Want to Avoid Shopify Stock, Even After Selling Off